Putin’s China pivot: All tactics, no trust

FORTUNE — For those who remember the days when Chinese leaders were supplicants to Moscow, seeking economic aid and diplomatic favors, Russian President Vladimir Putin’s state visit to Beijing this week was astonishing, even surreal.

On the surface, Putin remains as confident as ever. But everyone watching the swaggering Russian president knows that he had come to Beijing with the proverbial cup in hand. Isolated internationally after his land grab in Crimea, Putin is desperate for support abroad, particularly from China, now one of the world’s most powerful countries.

While the role reversal would have delighted the late Mao Zedong and infuriated the late Josef Stalin, the world has yet to digest what Putin’s trip to Beijing has actually accomplished and whether a new Sino-Russian strategic alliance is a geopolitical possibility.

At the moment, the logic for an alliance seems compelling, at least on the surface. Both China and Russia need each other to counter the West. Economically, Russia hopes to turn China into a huge market for its energy products, reducing its reliance on Europe for energy exports. Geopolitically, Moscow seeks closer coordination with Beijing so that they can jointly frustrate the West’s efforts to promote democracy and economic liberalism around the world.

As for China, having Russia’s abundant natural gas and oil would increase its energy security. In particular, China urgently needs to reduce its consumption of coal to alleviate its air pollution woes. Its only short-term solution is increasing the use of natural gas. On the geopolitical front, China faces renewed American pressure in response to its growing power in Asia. China’s ongoing maritime territorial disputes with Japan, the Philippines, and Vietnam have gained America’s attention. So if Putin can create trouble in Eastern Europe, China would benefit. Likewise, if China ratchets up tensions in East Asia, Putin would gain.

But even compelling geopolitical logic does not necessarily lead to a real strategic alliance. The fragility of the budding Sino-Russian partnership was on full display during Putin’s visit, the centerpiece of which was supposed to be the signing of a long-term agreement for China to purchase Russian natural gas.

At first, negotiations were deadlocked, with neither side willing to budge on prices. The Russians were insisting on setting a high price while the Chinese, sensing Russian weakness, were trying to bargain the rate down significantly. Disaster was averted at the last minute when both sides reached an opaque agreement that would enable Russia to export $400 billion worth of gas to China over 30 years, starting in 2018.

Although the price was not disclosed, Russian media reported that it will be around $350 per thousand cubic meters, roughly the average for Russian gas exports to Europe but lower than the price for gas exported to Germany and other rich Western European countries (which have to pay over $400 per thousand cubic meters).

If anything, the Sino-Russian gas deal epitomizes the nature of the ties between Moscow and Beijing. Their relationship is purely utilitarian and lacks enduring foundations of mutual interest and shared values.

Nations become strategic allies not simply because they share the same potential opponents. They need to have deep trust in each other. At a minimum, trust is easier to build when potential allies have no fear of each other. And such trust becomes unshakeable if they share the same values.

Unfortunately, none of these conditions applies to the Sino-Russian relationship. Russia fears China, which borders on Russia’s sparsely populated far eastern region, part of which was, in the eyes of the Chinese, stolen from China in the late 19th century. Many Russians worry that China will take over that land, either through migration or more sinister means. Unlike the West, which has facilitated China’s rise and has come to recognize it as a reality, the Russian elite has trouble accepting China, impoverished and impotent only a generation ago, as a great power.

Likewise, Chinese leaders are acutely aware of Russia’s quiet strategic balancing aimed at countering Chinese power. For instance, Russia has been the main supplier of arms to India, China’s long-time rival. Russian military hardware exported to India is superior to what it has sold to China. Russia has also provided Vietnam, which is now embroiled in a dangerous confrontation with China in the South China Sea, with advanced submarines and jet fighters that could give the Chinese military a bloody nose if a fight breaks out.

In terms of political values, Putin and the Chinese Communist Party are united in their hostility toward Western democracy. But hatred, unlike love, does not form lasting bonds. In the contemporary world, democracies forge enduring ties because their values are founded on the love of freedom. Dictatorships, by contrast, have no such positive values as the basis of trust — otherwise, Hitler would not have invaded Stalin’s Soviet Union.

So while the West needs to remain vigilant toward both Russia and China, they should not lose sleep over a new Moscow-Beijing axis. Russia and China are tactical partners, pure and simple.

Minxin Pei is the Tom and Margot Pritzker ’72 Professor of Government at Claremont McKenna College and a non-resident senior fellow of the German Marshall Fund of the United States

If the U.S. is now an oil exporter, why $4 gas?

The U.S. is now selling more petroleum products than it is buying for the first time in more than six decades. Yet Americans are paying around $4 or more for a gallon of gas, even as demand slumps to historic lows. What gives?

Americans can be forgiven for doubting the U.S. is producing more oil today than anytime in the last eight years – a fact President Obama has hammered home again and again in his latest rounds of campaign stumping. Meanwhile, Republicans point to the rising price of gas, which seems to indicate a less-than-plentiful oil supply.

Despite all appearances, Obama is telling the truth. The U.S. is enjoying an energy boom. In North Dakota alone, shale oil drilling over the past year led to a greater volume of crude oil production than at least one OPEC country.

Americans have been told for years that if only we drilled more oil, we would see a drop in gasoline prices. (Speaking to voters last month, Newt Gingrich made the curious assurance that more oil drilling could drive down gasoline prices to $2.50 a gallon, prompting the White House to accuse him of “lying.”)

Until this time last year, gas prices hinged on the price of U.S. crude oil, set daily in a small town in Cushing, Oklahoma – the largest oil-storage hub in the country. Today, gasoline prices instead track the price of a type of oil found in the North Sea called Brent crude. And Brent crude, it so happens, trades at a premium to U.S. oil by around $20 a barrel.

So, even as we drill for more oil in the U.S., the price benchmark has dodged the markdown bullet by taking cues from the more expensive oil. As always, we must compete with the rest of the world for petroleum – including our own.

This is an unprecedented shift. Since the dawn of the modern-day oil markets in downtown Manhattan in the 1980s, U.S. gasoline prices have followed the domestic oil price (which, for the most part, has been more expensive than oil from the North Sea, a slice of the Atlantic between Great Britain, Germany, Scandinavia, Belgium and the Netherlands).

However, heightened drilling in the U.S., combined with the flood of oil from the tar sands in Canada, has consistently pressured the U.S. oil price below its counterpart in the North Sea. The two types of oil once traded in lockstep, but have recently deviated so much that many do not believe they will trade neck-and-neck again. In the past year, U.S. oil prices have repeatedly traded in the double-digits below the Brent price. That is money Wall Street cannot afford to walk away from.

To put it more literally, if a Wall Street trader or a major oil company can get a higher price for oil from an overseas buyer, rather than an American one, the overseas buyer wins. Just because an oil company drills inside U.S. borders doesn’t mean it has to sell to a U.S. buyer. There is patriotism and then there is profit motive. This is why Americans should carefully consider the sacrifice of wildlife preservation areas before designating them for oil drilling. The harsh reality is that we may never see a drop of oil that comes from some of our most precious lands.

With the planned construction of more pipelines from Canada to the Gulf of Mexico, oil will be able to leave the U.S. in greater volumes. This may eventually smooth out energy prices globally, but in the short term it will probably mean more of our North American petroleum products will be lost to competition from abroad.

Demand for oil in the U.S. has eased with this year’s higher prices – a situation dubbed “demand destruction” by industry insiders – but overseas demand has not cooled. That means America will have to fight to keep oil on its shores instead of seeing it shipped to another country – by paying dearly for that privilege.

Energy independence may be within our reach. But it comes at a price.

Leah McGrath Goodman is the author of The Asylum: The Renegades Who Hijacked the World’s Oil Market.